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For some time we have been foreshadowing the introduction of lower thresholds for foreign investment in rural land. The lower thresholds were part of key changes recommended by the Senate Rural and
Regional Affairs and Transport References Committee (“Committee”) in late June 2013 and have been a part of the Government’s
policy platform since late 2012.
It therefore comes as no surprise that the
FTAs with South Korea (“KAFTA”) and Japan
(“JAEPA”) set out lower thresholds in the
rural sector.
While KAFTA and JAEPA have raised the
screening threshold at which South Korean
and Japanese investment in non-sensitive
sectors is considered by the Foreign
Investment Review Board from A$248 million
to A$1078 million – the same amount for
New Zealand and United States investors –
the FTAs state that “Australia reserves the
right to adopt or maintain any measure to
allow the screening of proposals by foreign
persons to invest A$15 million or more in
Australian agricultural land and A$53 million
or more in Australian agribusinesses.”
Both the Coalition policy platform and the
Senate Foreign Affairs, Defence and Trade
References Committee report on KAFTA state
that the review thresholds for the agricultural
sector would apply for cumulative purchases
by an investor. However, nothing has been
said in this regard on JAEPA and FTA
expressly states that the thresholds apply
cumulatively. Further, although the
Government’s policy includes a threshold of a
15% investment in agribusinesses of A$248
million or more, where the A$53 million
threshold doesn’t apply; this is not included in
the KAFTA or JAEPA.
It will be interesting to see how the
Government will apply this policy in relation to
any negotiations with China on this aspect.
What is clear is that the introduction of the
key changes recommended by the
Committee must now only be a short period
away. In addition to lowering the monetary
threshold for foreign investment in
agricultural land from A$248m to A$15m, the
Committee also recommended a zero dollar
threshold for foreign investment in
agricultural land once cumulative purchases
of A$15million have been reached, lower
thresholds for foreign investment in
agribusinesses and the establishment of a
register of foreign ownership of rural land.
Under the change, foreign investors will be
required by law to report the value and level
of their interest in Australian rural land.
In implementing the proposed changes,
current political and public sensitivity to
investment in the sector needs to be
addressed and handled carefully in order to
ensure that foreign investment continues to
AGRITHINKING
AUGUST 2014
2www.kwm.com
INSIDE THIS ISSUE
IN THE NEWS
1 WELCOME TO AGRITHINKING
2 FOREIGN INVESTMENT UPDATE
4 Q&A WITH PAINE & PARTNERS
6 CHINA’S NEW ENVIRONMENTAL
PROTECTION LAW:
RED CHINA GOES GREEN
8 WHAT OBLIGATIONS ARE YOU
ASSUMING FOR HEALTH AND SAFETY
WHEN INVESTING IN OR OPERATING
AN AUSTRALIAN AGRIBUSINESS?
11Q&A WITH STEFAN LUKE
continued from previous page...
Drawing from his experience in the iron ore
industry, Mr Forrest believes: “If we market
ourselves as Australia to all of China, then that lifts
our entire country in the eyes of China and we
become in the Chinese psychology the supplier of
choice whenever you think beef, wool, cotton or
natural products”. To avoid the same lost
opportunity in the early days of Australian iron ore,
Mr Forrest is advocating for a cohesive response
from Australian governments and food suppliers
– taking the focus away from local competition
and addressing the inefficiencies created by gaps
in state and federal policy.
be attracted to the sector. It is well
recognised, as set out in the Government’s
Foreign Investment Policy, that “foreign
investment plays an important role in
maximising food production and supporting
Australia’s position as a major net exporter of
agricultural produce, by financing investment,
and delivering productivity gains and
technological innovations.” This positive side
of foreign investment needs to be balanced by
having FIRB scrutinise investment. FIRB’s
monitoring of foreign investment plays a
central role in addressing community concern.
There will be a significant increase in FIRB
applications as a result of the lower thresholds.
We hope that FIRB will be adequately
resourced to cope with the additional work
and maintain the current 30 day timing for
issue of decisions. To ensure that foreign
inflows into the agri sector are not unduly
impacted by the proposed changes to the
foreign investment thresholds and introduction
of a new register, we also suggest that:
• FIRB’s approach to greater scrutiny be
clear and well defined;
• the current approach to welcoming foreign
investment continue alongside the
increased scrutiny;
• the Foreign Investment and Trade Policy
Division of the Treasury be adequately
resourced to cope with the additional flow
of applications;
• consideration be given to the use of a bulk
or pre-approval process to assist with
processing the higher volume of proposals;
• the approach to attaching conditions to
statements of no objections for the future
use of rural land be consistent and
well defined;
• the scope of the register of foreign
ownership of land be made clear, and that
the definitions used in relation to the
register be consistent with the foreign
investment regime; and
• access to the register by non-government
related third parties be prohibited or at least
restricted to high level information only.
Malcolm Brennan
Partner
T +61 2 6217 6054
M +61 417 290 705
malcolm.brennan@au.kwm.com
AGRITHINKING
AUGUST 2014
3www.kwm.com
1 WELCOME TO AGRITHINKING
2 FOREIGN INVESTMENT UPDATE
4 Q&A WITH PAINE & PARTNERS
6 CHINA’S NEW ENVIRONMENTAL
PROTECTION LAW:
RED CHINA GOES GREEN
8 WHAT OBLIGATIONS ARE YOU
ASSUMING FOR HEALTH AND SAFETY
WHEN INVESTING IN OR OPERATING
AN AUSTRALIAN AGRIBUSINESS?
11Q&A WITH STEFAN LUKE
INSIDE THIS ISSUE
IN THE NEWS
ACCC PROCEEDINGS AGAINST THE
AUSTRALIAN EGG CORPORATION
The ACCC has instituted proceedings in the
Federal Court against Australian Egg Corporation
Limited (“AECL”), three directors of AECL and two
other egg producing companies.
AECL is an industry corporation that collects levies
for promotional activities and research and
development activities from member egg
producers. The ACCC alleges that AECL and the
other corporate and individual respondents
attempted to induce egg producers who were
members of AECL to enter into an arrangement to
cull hens or otherwise dispose of eggs, for the
purpose of reducing the amount of eggs available
for supply to consumers and businesses in
Australia. Further information on the proceedings
can be found in KWM’s In Competition blog here:
www.incompetition.com.au/2014/05/
accc-cracks-eggsplosive-cartel-attempt
Q&A WITH PAINE & PARTNERS
Paine & Partners is a private equity firm that
focuses on investments in the food and
agribusiness sector globally. Recently
Shannon Finch and Henrik Moritz of our
Sydney office discussed Paine & Partners’
approach to investments with Kevin Schwartz,
President of Paine & Partners, and Angelos
Dassios, Partner at Paine & Partners. Kevin
and Angelos have been closely involved in the
firm’s investment in Costa Group, Australia’s
largest private producer, marketer and exporter
of fresh fruit and vegetables, and are directors
of Costa. Here is a summary of their views.
What has motivated Paine & Partners to
direct its focus on the agribusiness sector?
Since 2000, Paine & Partners has invested
over $1 billion in businesses across the
global food and agribusiness value chain.
We believe the agribusiness sector presents
a very compelling area for investment, with
increasing global demand for food being
mapped against an increasingly constrained
supply chain. By focusing our efforts in this
industry, we have developed deep domain
expertise in all areas of the value chain along
with strong relationships with industry
leaders across the globe; this focus enables
us to find attractive, proprietary opportunities
for investment.
In addition to our investment in Costa, we
have a range of agribusiness investments
around the globe, including Scanbio in
Norway, Eurodrip in Greece, Icicle Seafoods
in Alaska, Verdesian in North Carolina, and
Sunrise Growers in California.
In their recent report “The lucky country”,
Deloitte identified agribusiness as one of
the “fantastic five” sectors that would
drive economic development in Australia
in the next 20 years. What role do you
see for Australia in the global food
production market?
The global food and agribusiness industry is
positioned for significant growth and
evolution over the next 20 years. In our view,
Australia is uniquely positioned to capitalise
on favourable industry trends – principally, a
growing global supply and demand
imbalance driven by population growth, a
rising middle class and increasingly
constrained agricultural resources.
From a demand perspective, Australia sits as
a gateway to Asia, a leading contributor of an
increasing global population and expanding
affluence. We believe there is still a
significant opportunity to supply Asia with
quality Australian agricultural products that
command a market premium to domestic
Asian alternatives. On the supply side,
Australia’s geographic vastness and diversity
provides an ideal backdrop for 52-week
supply capabilities across the full spectrum
of agricultural products to meet domestic,
Asian and even global market demands.
The ability for Australia to capitalise on these
macro trends and its unique position in the
global food production market will depend,
in part, on foreign policy, labour costs and
private sector investment.
What are the opportunities you see for
international financial investors in
targeting Australian agribusinesses?
We see compelling and actionable
investment opportunities across the food
and agribusiness value chain from
agricultural inputs (such as fertilisers and
animal feed), to crop production and
aquaculture, to processing and distribution.
The attractiveness of those opportunities will
depend on the specific investment goals of
each financial investor (e.g. growth equity vs.
buyout vs. real asset investors).
What are the challenges?
In our view, the challenges in investing in
Australian agribusiness are not dissimilar
from those posed in other global
agribusiness markets – including the need to
manage commodity cycles, weather risks
and regulatory frameworks.
At Paine & Partners, we focus on specific
areas of the value chain to mitigate those
industry-specific challenges and create a
portfolio insulated from high cyclicality and
commodity impacts.
AGRITHINKING
AUGUST 2014
4www.kwm.com
1 WELCOME TO AGRITHINKING
2 FOREIGN INVESTMENT UPDATE
4 Q&A WITH PAINE & PARTNERS
6 CHINA’S NEW ENVIRONMENTAL
PROTECTION LAW:
RED CHINA GOES GREEN
8 WHAT OBLIGATIONS ARE YOU
ASSUMING FOR HEALTH AND SAFETY
WHEN INVESTING IN OR OPERATING
AN AUSTRALIAN AGRIBUSINESS?
11Q&A WITH STEFAN LUKE
INSIDE THIS ISSUE
IN THE NEWS
GINA RINEHART PURCHASES STAKE IN
CATTLE STATIONS
Gina Rinehart has paid $40 million for a 50% stake
in two Kimberly cattle stations and is currently
negotiating further investments in the agricultural
sector. Mrs Rinehart said her investment would
provide the capital and commercial knowledge to
support the cattle industry as it expands into
global markets.
HAZELNUT FARM TO BOOST RIVERINA
ECONOMY
Agri Australis Pty Ltd, a subsidiary of global
confectionary company, the Ferrero Group, has
recently commenced the planting of more than
one million trees on a new $70m hazelnut
investment in the Riverina. The farm is a result of
extensive consultation between Agri Australis, the
Department of Primary Industries and the
Commonwealth Government. The Government
hopes that the farm will act as a large
demonstration site to show other farmers and
investors the potential of hazelnut cultivation.
One unique and unavoidable challenge of
international investing in Australia is the lack
of geographic proximity, with Australia being
oceans apart. In the absence of a daily,
on-the-ground presence, in our experience,
partnering with strong management teams
and family owners, such as the Costa family,
is the best way to narrow that gap.
Paine & Partners has developed a unique
approach to selecting investment
opportunities globally. Can you describe
that approach and how you have applied
it to identifying opportunities in
Australia specifically?
Paine & Partners focuses on proprietary,
self-sourced deal flow generated by working
directly with management teams and
strategic partners. Over the last 20 years,
we have developed a track record of creating
exclusive transactions by building
relationships and contacts and crafting
solutions, often over several years, to
facilitate complex transactions that require
both financial and intellectual capital.
We have both formal and informal processes
for identifying investment focus areas. Our
industry research typically drives top-down
investment theses. Our professionals then
build relationships with industry constituents
and proactively target specific transaction
opportunities. The combination of Paine &
Partners’ in-depth industry knowledge and
extensive network of relationships has allowed
us to make investments through exclusively
negotiated transactions rather than
competitive auction processes. Our approach
to investing in Australia is no different.
One of the key issues we continue to
encounter in negotiating investments into
Australian agribusinesses is the tension
between retaining the management expertise
and experience of the local owners, who are
often family businesses, and obtaining
sufficient control over the conduct of the
acquired business.
What advice can Paine & Partners offer to
local farmers and operators who may be
looking to team up with a financial investor?
We believe that strong partnerships and
collaboration with management teams is
essential to the success of our investments.
We seek to design productive working
partnerships with management teams by
aligning value creation objectives from the
start. We value the unique operating
expertise that management teams and family
owners bring to the table and believe that a
combination of that expertise with our
industry knowledge and financial resources
maximises value for all stakeholders.
You made a significant investment in
Costa Group in 2011, and then followed
that up with acquiring Adelaide
Mushrooms last year. What has been
your experience in investing in, and
operating, a vertically integrated fruit and
vegetable business in Australia?
Our experience investing and operating in
Australia has been consistently positive
throughout our ownership period from our
initial 2011 investment to our 2013 follow-on
acquisition and through our successful 2014
strategic expansion plan financing. We
attribute our positive investment experience
in part to a strong partnership with our equity
partners and management team,
underpinned by a shared strategic vision,
and in part to the favourable underlying
Australian business climate.
Shannon Finch
Partner
T +61 2 9296 2497
M +61 400 442 991
shannon.finch@au.kwm.com
Henrik Moritz
Senior Associate
T +61 2 9296 2153
M +61 447 268 703
henrik.moritz@au.kwm.com
AGRITHINKING
AUGUST 2014
5www.kwm.com
1 WELCOME TO AGRITHINKING
2 FOREIGN INVESTMENT UPDATE
4 Q&A WITH PAINE & PARTNERS
6 CHINA’S NEW ENVIRONMENTAL
PROTECTION LAW:
RED CHINA GOES GREEN
8 WHAT OBLIGATIONS ARE YOU
ASSUMING FOR HEALTH AND SAFETY
WHEN INVESTING IN OR OPERATING
AN AUSTRALIAN AGRIBUSINESS?
11Q&A WITH STEFAN LUKE
WHAT THE GM FARMING DISPUTE
MEANS FOR AUSTRALIAN AGRICULTURE
The WA Supreme Court has handed down its
decision in the well-publicised claim by an organic
farmer against his neighbour who grew genetically
modified canola.
The case highlights two key points for agribusiness
in WA:
• If you are operating or looking to invest in an
operation that farms GM crops, or is proposing
to undertake an activity that might adversely
affect a neighbour, it is worth ensuring that the
operation has measures in place to ensure that
any risks to neighbours are appropriately
identified, managed and addressed; and
• If you are seeking to rely on a premium product,
such as organic certification, then it is important
to understand the applicable standard and the
contract by which it is applied. Do what is
required to meet that standard and seek to
ensure it is properly applied by the accrediting
agency that you have contracted with in your
particular circumstances.
Further analysis on the decision can be found on here:
www.mallesons.com/publications/marketAlerts/2014/
Pages/What-the-GM-farming-dispute-means-forAustralian-agriculture.aspx
INSIDE THIS ISSUE
IN THE NEWS
CHINA’S NEW ENVIRONMENTAL PROTECTION LAW: RED CHINA GOES GREEN
Earlier this year the PRC Government
approved changes to the Chinese
Environmental Protection Law, for the first
time in 25 years. These amendments are
part of the Chinese Government’s “War on
Pollution”, which has become a key priority
of the Chinese Government.
The amendments strengthen environmental
protection responsibilities and consequences
for environmental violations. Companies
looking to do business in China will need to
pay close attention to these changes and
make sure they are in a position to comply
with the new requirements when they come
into force on 1 January 2015. With this in
mind, here is some information about the
key reforms.
Stricter obligations for companies
The amendments strengthen the obligations
on companies regarding pollution prevention.
They have expanded the scope of projects
that are subject to environmental impact
assessment. They also introduce
requirements for certain companies to:
• obtain a discharge licence;
• establish environmental protection
responsibility systems;
• install monitoring equipment and keep
monitoring records;
• prepare emergency response plans for
emergency incidents;
• disclose information about emissions; and
• follow control indicators of total emissions of
key pollutants allocated to the companies.
The amendments also strengthen the
enforcement mechanisms and provide for
more severe punishment for illegal acts.
Under the existing law there is little
incentive for companies to comply with the
law as authorities can only impose a
one-time penalty on polluters and the
maximum penalty is low. The amendments
introduce a day-based punishment system
and remove the cap on fines.
All violations of the environmental law will be
recorded on a publicly available pollution
black list. If that is not incentive enough to
comply with the law, there is also the risk of
detention for employees who are directly in
charge of environmental violations along with
new powers for the authorities to shut down
operations and confiscate property.
Public interest litigation
The amendments also clarify the scope of
public-interest environmental litigation and
provide a legal channel for citizens and
community groups to participate in
environmental protection. In the past,
experiments with settling disputes through
environmental courts faced difficulties due to
the lack of a legal basis. Under the amended
law, a social organisation that meets certain
conditions may appeal to the courts for acts
that pollute the environment, damage
ecology, and harm the public interest.
According to preliminary estimates, nearly
300 social organisations in China meet these
requirements. These amendments have the
potential to improve the enforcement of the
environmental law by strengthening the
influence of civil society on environmental
protection in China.
AGRITHINKING
AUGUST 2014
6www.kwm.com
1 WELCOME TO AGRITHINKING
2 FOREIGN INVESTMENT UPDATE
4 Q&A WITH PAINE & PARTNERS
6 CHINA’S NEW ENVIRONMENTAL
PROTECTION LAW:
RED CHINA GOES GREEN
8 WHAT OBLIGATIONS ARE YOU
ASSUMING FOR HEALTH AND SAFETY
WHEN INVESTING IN OR OPERATING
AN AUSTRALIAN AGRIBUSINESS?
11Q&A WITH STEFAN LUKE
NATIONAL FOOD BRAND RESEARCH
RESULTS ANNOUNCED
Austrade has announced the results from its survey
of Australia’s National Food Brand. The results
reveal that Australia is highly regarded in the
production of milk, wine, meats and baby foods,
and suggest that these are all areas of opportunity
for export. The results also illustrate that:
• there are significant growth opportunities in
terms of both markets and categories;
• Australia as a food brand is well regarded but
not well differentiated;
• there are significant benefits of speaking with
one voice; and
• the only credible and consistent positioning that
works is to use what people already know
about Australia.
National Food Brand funding was discontinued on
30 June 2014. However, Austrade will continue to
assist the states to coordinate a “Team Australia”
approach to food export promotion at the end
of 2014.
A copy of Austrade’s presentation can be found here:
www.austrade.gov.au/ArticleDocuments/1418/
Food-Brand-international-webinar-2014.pdf.aspx
INSIDE THIS ISSUE
IN THE NEWS
Environmental tribunals
Another thing to note is that the Chinese
Supreme Court has recently established an
Environmental and Resources Tribunal and
appointed a senior judge to handle
environmental cases. The tribunal will hear
appeals from lower courts, supervise the trial
of environment cases in lower courts and
draft judicial explanations about those cases.
All provincial high courts will also be required
to set up similar institutions. It is anticipated
that this will result in a higher number of
environmental cases.
What should companies do?
Companies should make sure they are
across these changes and have systems in
place in order to comply with these changes
prior to January 2015. Companies should
also keep an eye out for the series of related
law, regulations and implementation rules
that are expected to be released prior to
January 2015 and ensure that they also
understand those changes.
Companies should expect to see increased
compliance monitoring by the Government as
these new laws are implemented. Recently,
Chinese officials announced that the
Government has adopted what can only be
described as a novel approach to compliance
monitoring – by developing drones designed
to detect illegal night-time emissions from
factories using infrared cameras. Companies
should be willing to engage in dialogue and
cooperative activity with the authorities in
order to avoid punishment.
These reforms to the Environmental
Protection Law are just one of several
initiatives undertaken by the Chinese
Government as part of its “War on Pollution”.
Companies should be geared up to deal with
what the Chinese Government is saying is a
change in approach to the way
environmental issues are managed.
Sally Audeyev
Partner
T +61 8 9269 7242
M +61 411 152 916
sally.audeyev@au.kwm.com
Rong Fang
Partner – Beijing
T +86 10 5878 5051
M +86 136 9927 5399
fangrong@cn.kwm.com
Qing Wu
Partner – Guangzhou
T +86 20 3819 1007
M +86 138 0262 1013
wuqing@cn.kwm.com
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AUGUST 2014
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1 WELCOME TO AGRITHINKING
2 FOREIGN INVESTMENT UPDATE
4 Q&A WITH PAINE & PARTNERS
6 CHINA’S NEW ENVIRONMENTAL
PROTECTION LAW:
RED CHINA GOES GREEN
8 WHAT OBLIGATIONS ARE YOU
ASSUMING FOR HEALTH AND SAFETY
WHEN INVESTING IN OR OPERATING
AN AUSTRALIAN AGRIBUSINESS?
11Q&A WITH STEFAN LUKE
HEALTH STAR RATING SYSTEM FOR
FOOD REINSTATED
State and federal ministers have agreed to
introduce a healthy food star rating system that
will allow food producers to adopt a voluntary
system for comparing the healthiness of different
types of foods. The system, a key recommendation
of the 2011 Blewett review of food labelling and
first proposed to be introduced last year, is similar
to the energy star rating system on white goods
– it sees healthier food choices carrying more stars
than less healthier choices. While the system is
endorsed and will be promoted by Government, it
will not be a mandatory standard that becomes
part of the Food Standards Code. Rather, as a
voluntary scheme, it will rely on the goodwill of
food manufacturers to adopt it. Encouragingly,
Woolworths and Sanitarium have both announced
that they will adopt the system across their
product range.
INSIDE THIS ISSUE
IN THE NEWS
WHAT OBLIGATIONS ARE YOU ASSUMING FOR HEALTH AND SAFETY WHEN INVESTING IN OR
OPERATING AN AUSTRALIAN AGRIBUSINESS?
Investors in Australian agribusiness projects
should consider occupational safety and
health issues when making investment
decisions, immediately after completion of
any transaction and at all times when
operating the agribusiness. Primary
statutory obligations to ensure safety and
health of those working in the business may
be imposed on both the investing company
and its directors and officers.
Are you taking the necessary steps to meet
those obligations?
What are the obligations?
Work health and safety (“WHS”) legislation in
all Australian states and territories, except
Western Australia and Victoria, imposes
primary obligations on companies operating
agribusinesses, joint venture participants and
partners in businesses to ensure, so far as is
reasonably practicable, the safety and health of:
• their workers;
• people who they cause to be engaged to
work at the site; and
• anyone at the site whose activities are
influenced or directed by them,
whilst working at the business. These
obligations are imposed individually on each
entity involved in the business either as
operator, joint venture participant or partner.
If your business is the entity operating an
agribusiness it will also have primary
obligations for health and safety in Western
Australia and Victoria.
Directors and officers of entities on whom
these primary obligations are imposed owe
statutory personal due diligence obligations
to ensure that their entity complies with its
WHS obligations. The flowchart below sets
out in summary what those obligations
require directors and officers to do:
AGRITHINKING
AUGUST 2014
8
Due diligence
means taking
reasonable
steps to…
Understand business
operations
and safety risks
(the ‘Understanding’ duty)
Acquire and maintain
knowledge of
safety matters
(the ‘Knowledge’ duty)
Audit and review WHS
processes and use
of resources
(the ‘Verification’ duty)
Allocate and use resources
for risk management
(the ‘Analysis and
Response’ duty)
Introduce processes
to receive, consider
& respond to
risk/incident information
Ensure WHS
legal compliance
(the ‘Compliance’ duty)www.kwm.com
1 WELCOME TO AGRITHINKING
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6 CHINA’S NEW ENVIRONMENTAL
PROTECTION LAW:
RED CHINA GOES GREEN
8 WHAT OBLIGATIONS ARE YOU
ASSUMING FOR HEALTH AND SAFETY
WHEN INVESTING IN OR OPERATING
AN AUSTRALIAN AGRIBUSINESS?
11Q&A WITH STEFAN LUKE
MURRAY GOULBURN PLANS
EXPANSION OF ITS DAIRY PRODUCTION
Murray Goulburn, Australia’s biggest milk
processor, is planning to expand its operations
and take advantage of the Asian food boom.
$127 million is going to be put into modernising its
dairy offerings, $74 million has been spent to build
a wrapped cheese facility, $38 million has been
spent to boost production of infant nutrition
products, and another $14 million has been spent
on the Edith Creek factory to install a bottling line
for a new line of breakfast beverages. Murray
Goulburn also increased its stake in the new
Tasmanian Dairy Products plant at Smithton and
have opened a new $80 million milk processing
plant. To support this investment they are
undergoing a partial float with a listed trust fund.
Gary Helou, Chief Executive of Murray Goulburn,
thinks Victoria and Tasmania’s dairy industry will
see significant growth in the next five years.
INSIDE THIS ISSUE
IN THE NEWS
It is important to understand that whilst WHS
legislation requires these steps to be taken
as part of directors’ and officers’ due
diligence, it does not limit these to being the
only steps that are required. The statutory
duty requires all due diligence to be
undertaken which may, in some cases,
require more to be done than what is listed.
Will these duties become obligations for
non-operating joint venture participants or
partners in Western Australia and Victoria?
Victoria has indicated it is not currently
intending to adopt these laws. The WA
government has announced it will
modernise its two primary health and safety
laws (covering mining and most other
businesses) by mid-2016. It is expected the
relevant duties outlined in this article will
apply in WA.
What do these obligations mean you need
to do?
Prior to investing in an Australian
Agribusiness
• Conduct a thorough due diligence of the
business’s health and safety practices and
processes. This should consider legal
compliance and sustainability issues. You
should obtain a good understanding of
what risks the business faces and how
those risks are managed.
• You should also review documentation on
any serious incidents and near-misses and
find out whether any regulatory action has
been taken (or could be taken in the future)
in respect of these incidents. Prosecutions
for breaches of WHS obligations typically
must be commenced within 3 years of
an incident.
Immediately after completion
• Take steps to address the issues you have
identified as being risks that are not fully
managed in a sustainable manner.
• If you have invested in a business as a
non-operating joint venture participant or
partner you need to establish a process by
which you can check that the operating
entity is properly managing the health and
safety of the operations.
• Identify who the officers of your entity are
and ensure they are trained in what their
obligations are and how to go about
meeting them.
• Develop processes to make your directors’
and officers’ compliance with their due
diligence obligations as simple as possible.
These could include things such as
checklists to complete during site visits
and simple auditing tools.
During operation
• Continue to conduct checks that the
operating entity is properly managing the
health and safety of operations.
• Proactively take steps to ensure that safety
hazards in the business are identified
and managed.
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AUGUST 2014
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1 WELCOME TO AGRITHINKING
2 FOREIGN INVESTMENT UPDATE
4 Q&A WITH PAINE & PARTNERS
6 CHINA’S NEW ENVIRONMENTAL
PROTECTION LAW:
RED CHINA GOES GREEN
8 WHAT OBLIGATIONS ARE YOU
ASSUMING FOR HEALTH AND SAFETY
WHEN INVESTING IN OR OPERATING
AN AUSTRALIAN AGRIBUSINESS?
11Q&A WITH STEFAN LUKE
BRIGHT FOOD GROUP LOOKING FOR
OPPORTUNITIES IN AUSTRALIAN FOOD
AND WINE SECTOR
Chinese powerhouse, Bright Food Group has set
an impressive target of spending 50% of its more
than $4 billion in annual revenues on international
acquisitions. According to senior executive
Zhiyong Wang (Bright Dairy’s East China Central
Factory manager), the company is looking for
vertical integration opportunities – not only in dairy
products, but also in wine and other food
products – where it can work together with local
businesses in technical co-operation, quality
management and new product development.
While speaking during a visit to Australia for the
Dairy Australia China Scholarship program, which
involved attending training programs and visiting
dairy farms and manufacturing plants, Mr Wang
urged more Australian firms to do the reverse and
visit China: “I would like to see more Australian
companies go to China to learn more about the
market and offer more help in terms of technical
co-operation and quality management in the future.”
INSIDE THIS ISSUE
IN THE NEWS
• Ensure your directors and officers take the necessary steps to meet their due diligence obligations.
This should include consideration of at least the following (and likely will require more):
Knowledge duty • Have up to date knowledge of WHS legislation, current industry practices and health and safety principles and practices.
• Require that reports to your directors and officers be focused on risks and risk management, not statistics.
• Have a strategic commitment to health and safety, identifying injury prevention as an issue for the business and part of
staff retention – occupational health must be a priority.
• Consider if there is any need for governance or “Line of Sight” tools in any part of the business.
Understanding duty • Have a good understanding about the nature of the operation and its risks and the steps required to manage those risks.
• Be constantly alert to the potential for like risks and how they need to be managed.
• Be focused on continuous improvement of the safety management system.
• Have in place good consultant and communication processes so information about safety matters is received from the workforce.
Analysis and
response duty
• Ensure that the risk management process actively and decisively identifies and eliminates risk.
• Encourage a reporting culture.
• Have in place a timely process for considering incidents, hazards and risks and responding to them.
Process and
procedure
• Sufficient resources must be in place to manage the risks.
• An appropriate safety management system is required and should be regularly reviewed.
• Particular care is required in the selection of and management of any contractors engaged to undertake work.
• Infrastructure must be maintained and appropriately upgraded.
Compliance duty • Undertake a legal compliance audit of policies, procedures and practices against the legislation and regulations.
External assistance for audits will be required from time to time.
Verification duty • Take a leadership role in checking and ensuring the safety system is being complied with.
Check that what your safety professionals have recommended has been done.
• Record what is done to comply with the legal
duties in a simple, but effective manner.
Prosecutions and other regulatory investigations
can prove costly where an incident is found
to be a result of systemic failings in respect to
safety policies and practices. For example,
the 2013 statistics for Western Australia
indicate that one third of fatal accidents
within the agriculture industry are due to
vehicle collisions (with another vehicle or with
a stationary object), whilst a further 12% of
fatalities were a result of a rollover of nonroad vehicles such as tractors and quad
bikes. These statistics highlight the
importance of ensuring that the business you
are investing in has procedures in place to
educate workers and effectively manage the
high risk of vehicle-related accidents.
Sarah Harrison
Partner
T +61 8 9269 7130
M +61 409 787 591
sarah.harrison@au.kwm.com
AGRITHINKING
AUGUST 2014
10www.kwm.com
1 WELCOME TO AGRITHINKING
2 FOREIGN INVESTMENT UPDATE
4 Q&A WITH PAINE & PARTNERS
6 CHINA’S NEW ENVIRONMENTAL
PROTECTION LAW:
RED CHINA GOES GREEN
8 WHAT OBLIGATIONS ARE YOU
ASSUMING FOR HEALTH AND SAFETY
WHEN INVESTING IN OR OPERATING
AN AUSTRALIAN AGRIBUSINESS?
11Q&A WITH STEFAN LUKE
INSIDE THIS ISSUE
IN THE NEWS
Q&A: STEFAN LUKE
Question: Where did your
interest in agribusiness
come from?
I’ve been led there by clients
– working with a number of
clients in the agribusiness
sector and also a range of stakeholders in the
resources industry that are really closely
interconnected. That has been a controversial
space but my own experience has been that
people are working hard to balance their
interests and cooperate effectively. The issues
and challenges that this group are collectively
confronting are fundamentally important, and
so of course you are drawn into those issues
and want to be involved and to help.
Question: Why do you enjoy working in
the agribusiness sector?
I like the people. I think there is something
special about primary production, and it is a
notoriously difficult and changeable industry.
The sectors I have been involved with are under
immense pressure from a range of factors –
climate, competition, other industries seeking
to share and access resources, and a number
of economic factors. So many of the people in
the industry are just pragmatic, stoic, straight
talking types that manage all of those factors
with a sort of relentless optimism that makes it
a pleasure to deal with them.
Question: The ‘dining boom’ and the
predicted increase in activity in the
agribusiness sector has been a story for
the last few years. Is it happening? Why
is it taking so long?
It does feel like a story always about to happen.
Some of the more experienced heads in the
industry will say that some aspects of the
dining boom, particularly in the north, have
been in the planning for a century now. And
there are some fundamental barriers that may
not be solvable – notably water – that make
some predictions potentially unachievable.
Nevertheless there is more going on than is
readily apparent, and momentum takes a while
to build. It has been a tough few years,
particularly in the north of Australia where I
have tended to be more involved. In the beef
industry there has been some very dry
conditions and also some regulatory disruptions
and challenges such as the live cattle export
ban in late 2012. The mining boom has been a
wonderful benefit to Australia but it has also
caused some difficulty for agriculture – our
currency has been very high in historical terms
and it has had other impacts in terms of people
and competition for resources which have had
to be managed.
Despite these challenges, there are some
encouraging fundamentals. The ongoing
development and enrichment of major
populations throughout the Asian region, with
the expected increases in demand for high
quality agricultural produce has been widely
predicted and appears on track. Recently
announced breakthrough developments in free
trade negotiations, including with South Korea
and Japan, have generally been positive for the
Australian agricultural industry and anticipation
is high that arrangements with China will be
concluded in the near future with similar
potential benefits.
Major producers such as Australian Agricultural
Co have shown great leadership in further
developing the Australian agribusiness sector.
Their new Greenfield Darwin abattoir facility is
expected to be commissioned in September
and represents a substantial new avenue for
Australian beef export through Darwin and into
the backyard of the Asian demand. We are also
aware of a range of other potential
opportunities being explored in Queensland
and Northern Australia.
Some of these opportunities may take some
time yet to mature, and some of the challenges
– our currency, access to patient capital, over
regulation and others – remain to be fully
addressed. But the fundamentals remain
positive and some success stories are starting
to emerge.
For more information contact Stefan Luke on
+61 7 3244 8214 or stefan.luke@au.kwm.com
GREEN PAPER ON DEVELOPING
NORTHERN AUSTRALIA
In June, the Federal Government released a Green
Paper on Developing Northern Australia to map out
the opportunities and challenges facing the region.
The paper provides businesses, individuals and
communities with an opportunity to help shape
the Government’s approach to Northern Australia.
The Government has identified six possible policy
directions, including the following which are
directly relevant to those in the agri-sector:
• delivering economic infrastructure, including
through planning and prioritising projects and
identifying effective ways to fund and finance them;
• improving land use and access, including
through more flexible and longer-term tenure;
• improving water access and management; and
• promoting trade and investment and strengthening
the business environment, including through cutting
red tape and increasing trade, especially with Asia.
A copy of the Green Paper can be found here:
northernaustralia.dpmc.gov.au/sites/default/files/
papers/Green_Paper.pdf. The Federal
Government will produce a White Paper on this
topic within 12 months.
AGRITHINKING
AUGUST 2014
11

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